The Internal Revenue Service released information on how employees now have until the end of the year to repay any payroll taxes they deferred from last year.
Former President Trump issued a presidential memorandum last August allowing Social Security taxes to be deferred for the rest of 2020, but under the order they had to be repaid by April 30, 2021. The coronavirus relief package that Congress passed last month extended the repayment period until the end of this year.
Relatively few companies actually implemented the payroll deferral for their employees because there was no guarantee that the deferred payroll taxes would ultimately be forgiven by Congress. However, federal employees and military service members were still required to accept the payroll tax deferral, meaning those taxpayers will be facing smaller paychecks later this year.
Jack Reagan is a managing director at UHY Advisors and a member of the firm’s national management committee that oversees the national audit and assurance practice. He has over 30 years of experience serving state and local governments, local school districts, federal government entities, and not for profit organizations as both an auditor and consultant. He has served many of the largest state and local government entities throughout the country, including New York City, Boston, San Jose, Nashville and Washington, D.C., as well as the states of New York, Texas, New Jersey, Delaware and California and Fairfax County (Virginia), Loudoun County (Virginia) and Montgomery County (Maryland). Reagan has also successfully assisted numerous localities in obtaining and maintaining their GFOA and ASB Certificates of Excellence in Financial Reporting. He graduated from the University of Richmond with a BSBA in accounting.
Archana Pradhan holds the position of principal, economist as part of the Office of the Chief Economist at CoreLogic. With years of experience in housing economics, applied econometrics and spatial analysis, she is responsible for analyzing housing and mortgage markets.
Prior to joining CoreLogic, she was program manager and senior research analyst at the National Community Reinvestment Coalition. She earned her doctorate in natural resource economics from West Virginia University.
Thom holds the position of professional, economist in the Office of the Chief Economist at CoreLogic. He is responsible for analyzing housing markets and home price trends. He has an extensive background in urban and real estate economics and applied econometrics.
Before joining CoreLogic, he held positions at the University of Virginia, Georgia Tech, and Harvard University. He earned his bachelor’s degree in economics, statistics and history at the University of Auckland, his master’s degree in economics from Tufts University and his doctorate in urban planning and development from the University of Southern California.
In Notice 2021-11, the IRS on Tuesday explained how employers who deferred payroll taxes on behalf of their employees can withhold and pay the deferred taxes throughout 2021 instead of just within the first four months of the year.
The deferral applied to employees who were paid less than $4,000 every two weeks, or an equivalent amount for other pay periods, with each pay period considered separately. The taxes, which are technically called Old Age, Survivors and Disability Insurance, or OASDI, are calculated at 6.2 percent of employees’ wages.
Notice 2021-11 makes changes to last year’s Notice 2020-65 to reflect the extended payment period. Payments made by Jan. 3, 2022, will be considered to be timely because Dec. 31, 2021, is a legal holiday. However, any penalties, interest and additions to tax will now start to apply on Jan. 1, 2022, for any unpaid balances
The IRS cautioned that employees could see their deferred taxes being collected immediately, so employees should check with their organization’s payroll point of contact on what their collection schedule will be.
